Adjusting financial goals (#198)

We've all had a few weeks to come to terms with Reality: Version 2020. Those of us who had our sights set on financial independence have watched our independence day creep a few years further down the line. 

The uncertainty we are currently facing has surely also made converts of those who didn't know financial independence was something worth striving for. Imagine how differently you would have approached this crisis if you knew you could continue to support yourself if you lost your day job. 

Life is happening to us in shouty capital letters at the moment, but a good financial plan is an adaptable financial plan precisely because life tends to happen to us all the time. If you had your sights set on a financial target that is no longer viable, now is the time to regroup and think of another plan.

In this week's episode we help you think through some strategies to get back on track once the crisis is over. We help you with some of the maths, but also offer some guidance on how to be adaptable if maths alone won't help.

P.S. We are very happy to announce that this week's episode was made possible by our preferred partner, OUTvest. To read more about our preferred partner programme, click here.

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Win of the week: Dee-dee 

My parents' investments aren't looking so lekker at this point. 

They just got access to their RAs. They have no emergency fund. They own their own company, that is very volatile and heavily based on tourism. 

I am finishing my honours. I have younger siblings who will remain dependent on them for at least another six years.

They are spending about R300,000 in bank fees, interest on credit card debt, bond and car payments to the bank per year. This is crazy! 

My dad mentioned the idea of using some (all that they can take out with the 1/3 cash withdrawal option) of their RA, as well as using the contributions they would be making to their RAs to attack their debt. 

The idea of taking money out of their RAs does not sit well with me at all, but if it means paying off the house quicker, they would have that as an investment property. The house is definitely worth more than they can get with their RA investments in 15 years. But this would be INCREDIBLE concentration risk! 

What worries me the most is their debt. It keeps accumulating and only minimums are being paid. 

The business is also not easily convertible, as it depends on my dad's skill. They still have about 10/15 years to go. There will be a bit of money from my grandparents going their way, but this is definitely a story of lifestyle creep and a few unfortunate business moves that may bite them hard if they don't look at this aggressively now. 

Given the great big market drop and my plan to move their RA to Sygnia (OUTvest isn't the cheapest since they aren't in that bracket yet), I am now thinking that I probably should not move the money at the moment, because I'd be selling and then re-buying, which would mean I'd be selling low....on the other hand I'd also be buying lowish... But I'd imagine now is just not a great time to move, which is sad, since that RA with Investec is not doing them any favours!

Keegan

Please explain a practical example of how somebody can transfer their RA if they are unhappy with their fees. Some of the things that would guide me greatly:

- finding out if your RA is screwing you

- How to go about stopping and transferring the RA

- What are the penalties included

I have been contributing per month to my annuity for almost a year now and am 28, so feel young enough to make changes, but old enough to make bad mistakes and errors in this all. 

Reeve

I would like to start investing with OUTvest, it will be my first retirement annuity.

I understand the fees are R4500 for the year if your investment is under 300k. 

Does it make sense for me to start investing with them immediately, or would the fees be lower if I start investing with other retirement annuities initially, and then move over the OUTvest after I've reached 300K? 

From what I understand, fees only start getting steep the greater the value of your investment. Since my investment value will be low initially, the R4500 fees applied every year by OUTvest is a bit much. For example: I want to contribute R2000 a month to OUTvest, by December I would have contributed R24 000, if we minus the R4500 fees from that, it's quite a big chunk that's going towards fees?

Jorge wants to know if it's worth moving his RA from 10X to OUTvest or if he should wait and see if other providers also rise to challenge.